1.
Tribunal has no power to modify penalty imposed by SEBI of suspension or
cancellation – Securities and Exchange Board of India Act,1992 – S.12
The respondent acted as a
sub-broker at the National Stock Exchange (NSE) without being registered as a
sub-broker with the stock exchange. The SEBI found respondent guilty of
violating s. 12 and rule 3 and suspended the registration of the respondent.
The Tribunal based on the facts and circumstances of the case held that the
proved charges against the respondent were not serious to warrant suspension
of certificate of registration and it modified the penalty of suspension of
registration into penalty of certain sum. The Supreme Court held that in the
instance case the Broker/Sub-Broker position in case of violation of
statutorily provided under section 12 of the Act, which has to be read with
rule 3 of the SEBI (Stock Brokers and Sub- Broker) Rules, 1992 and when
something is to be done statutorily in a particular way it can only be done
that way and so no power is conferred on the Tribunal to travel beyond the
areas covered by S. 12 and Rule 3. Further, there is no scope for taking
shelter under a discretionary power and therefore the order of the Tribunal is
set aside.
SEBI vs. Saikala Associates
Ltd [2009] 91 SCL 433 (SC).
2. Return of cheque by bank
that it was reported lost would not attract penal provision – The Negotiable
Instrument Act, 1881 – S. 138
The appellant allegedly
filled the blank cheque and the cheque was presented for payment. On
presentation by the respondent the cheque was dishonoured by the bank on the
ground that it was reported loss by the drawer. The Respondent filed a
complaint petition upon issuance of the notices in terms of the proviso
appended to s. 138 of the Act. The appellant then filed an application u/s.
482 of Criminal Procedure Code, 1973 praying for quashing of the proceedings
u/s. 138 and the premise that the same was not maintainable. The appellant
made an appeal to Supreme Court stating that the High Court has committed a
serious error in passing the impugned order as it failed in to take into
consideration that the complaint petition even if taken to be correct does not
disclose the offence u/s. 138 of the Act. The Supreme Court stated that the
appellant did not have sufficient funds in his bank account this allegation
should have been made in the complaint petition for exercising the
jurisdiction for taking cognizance of the offence u/s. 138. As such offence
was not available under complaint petition the impugned judgment of the High
Court to be set aside and the appeal filed by the appellant to be allowed.
Raj Kumar Khurana vs. State
of (NCT of Delhi) [2009] 92 SCL 370 (SC)
3. Avoidance of Voluntary
Transfer – Companies Act,1956 – S. 531A
The Official Liquidator
invoked the provisions of S. 531A because transaction of sale took place
within one year prior to the date of presentation of the winding up petition
before the court. The Official Liquidator also filed his report seeking
direction to hand over the peaceful and vacant possession of the resort
property and treating the transaction of sale of property by
company-in-liquidation as void. The Official Liquidator averred in the report
that consideration paid by the respondent could not have been said to be the
fair market value of the property and that there was no resolution had come on
record before entering into transaction of sale and so there was violative of
the provisions contained u/s. 293(1) (a). The Court held that the assets of
the company were sold for the purpose of discharging its liabilities towards
the creditors and the process of sale of assets was started way back. There is
no substance that that a transaction is in violation of s. 293(1)(a) and s,
531A of the Companies Act, 1956 and the sale is confirmed.
O.L of Trimline Health &
Resort Ltd. vs. GSFC & 4 [2009] 92 SCL 323 (Guj)
4. Retracted statement for
the purpose of levy of penalty – Foreign Exchange Regulation Act, 1973 – Sec. 8
read with Sec. 9
The appellant was detained
and two different statements were made by him before the authorities
disclosing the transactions relating to import of goods. The appellant also
stated to have confessed that he was responsible for remittance of foreign
exchange and was arrested on the basis of this confession as it violates s. 8
and s. 9. The appellant was present before the Metropolitan Magistrate and
retracted the confession made by him on the ground that it was recorded by
force, coercion and threat. He also contended that no reliance should be
placed unless such was corroborated substantially by some independent
evidence. The appropriate authority based on this imposed penalty on the
appellant. on appeal, Tribunal dismissed the appeal holding that the
retraction alone would not make the confession inadmissible and even a
retracted confessional statement may be sufficient to hold the proceedee
guilty of violation of the provisions, imposition of penalty was legally
permissible. On further appeal, held that the proceeding under the Act is
quasi-criminal in nature which confers various powers upon the authorities
prescribed. Even the salutary principles of mens rea and actus reus in a
proceeding under the Act may not be held to be applicable. Further apart from
the fact that no inquiry in that behalf had been directed, the finding of the
Tribunal that appellant was brain behind the subject import transactions and
was not involved in the actual transaction, did not meet the requirement.
Vinod Solanki vs. Union of
India [2009] 92 SCL 157 (SC)
5. Recognition of Stock
Exchange – Securities Contracts (Regulation) Act, 1956 – S. 5.
The appellant was a recognize
stock exchange whose recognition was to be renewed. The appellant filed an
application for renewal and the Board after conducting inspection found
several shortcomings and discrepancies in its organization, system and
practice which was not fair and equitable to the growing market of the
investors. The Board declined the renewal on the ground that the exchange has
failed to appoint an executive director and there was shortfall of base
minimum capital and non maintenance of Investor Protection Fund and Settlement
Guarantee Fund (SGF). The Tribunal held that the Board was right in holding
that he appellant could not be allowed to continue as a stock exchange without
maintaining the Investor Protection Fund and the SGF in the prescribed manner
and the infirmities and deficiencies which has been in the impugned order
could not be interfered.
Magadh Stock Exchange vs.
Securities and Exchange Board of India [2009] 92 SCL 113
(Sat-Mum).